Thursday, June 19, 2014

Platforms
and processes, rather than products, will become the focus of new business
creation as we move forward. The main characteristic of a handful of new trends
in business – Collaborative consumption, Sharing, the Maker movement and the Circular
economy – is that the value creation is less about adding some new feature to a
product. Instead, the appeal of these models is that they can deliver more
value for less by involving a number of stakeholders, including the users, in
co-creating solutions. What’s innovative, and what distinguishes successful
companies in this type of economy, is their ability to create well-working
platforms that enable a wide set of actors to participate.

Conventional
hotel chains like Hilton or Intercontinental have built their business over
decades by owning and operating hotels. Now, in just a few years, Airbnb has
created a service that rivals them in size, by coordinating that a great number
of private persons can rent out rooms to others. Likewise, the large media
companies used to be broadcasters that would send the same ready-made content
to millions of viewers. Now, 7 of the top ten global websites are services
based on content created by the users. Sites like Facebook, Wikipedia and
Twitter do not produce content, they operate platforms that make it easy for
millions of users to exchange the information they need.

Even
producers of physical devices need to start focusing on platforms and
processes, because increasingly, this is where they can create value for their
users. Take as an example a manufacturer of Digital SLR cameras. SLR cameras
have fallen drastically in price in recent years, while at the same time, the
quality and features offered by companies have become very similar.
Technically, the difference between Canon, Nike, Olympus or Sony is hard to
tell. In short, cameras have
become commodities, mainly competing on price – which is not a very attractive
game for a manufacturer to play. New features or marginal technical
improvements in image quality are getting harder and more expensive to develop
– even if they hardly can fetch a higher price.

The
superstructure

Instead a
company can try to improve the user’s experience by building services and
processes, for instance by creating sites that teach users to take better
pictures, galleries and competitions that allow users to show off their photos
and be inspired by others, forums where users can help each other with tips and
tricks, or platforms that allow users to share equipment or collaborate on
projects.

One could
think of these processes as a virtual ”superstructure”, which runs on top of
the physical product. For companies, it is typically a less expensive way to
improve the value of its solution to users, and often it creates a more engaged
and loyal relationship to customers.

The same
approach can be used for almost any object or device – whether it’s
pharmaceuticals, sporting goods or DIY tools. It’s likely that for many devices
there will be no point in trying to distinguish between the physical product
and its virtual superstructure – they become an integrated solution. Already
products like smart phones make no sense without all the apps and services that
run on it. The same will be true for 3D printers, cars, thermostats, running
shoes…

In some
cases, creating a popular superstructure, can allow a company to change its
status from being one among a number of other providers of equipment to
becoming an integrator, operating a
platform, where many others companies and their customers also go to create
solutions. Once again, Apple’s app-store is an obvious example.

Designing
tools for participation

From a design
perspective, this means that focus moves from designing finished products, to
designing tools that allow customers to participate and contribute to creating
a solution, which fits exactly to the individual users’ context.

This is
already evident in the many websites that enable users to customize the
products they order. Cars, furniture, glasses and shoes have been modularized,
so customers can pick and choose the combinations of features, colors and
materials they prefer. This makes the product much more valuable to the
customer, indicating that making the interfaces for participation effective and
easy to use is an important part of the overall design of what the company
offers.

Such mass customization
is at one end of the spectrum of involving users in value creation. At the
other end are much more open-ended systems for 3D printing, which allow users
to download CAD drawings and remix and redraw objects completely before
printing them out.

It seems
likely that users will increasingly expect and demand the option of co-creating
ever more details of the objects they use – at least those objects that they
are most engaged in or dependent on.

User-driven
innovation is another example of the power of creating platforms and services
rather than just physical objects. The toymaker LEGO very deliberately works to
engage its users in co-creating new products – and in the process, the
platforms for involving users have become extensions of the LEGO experience.
LEGO Cusoo is an example; it’s a website, where users can show off their
constructions, and where they can vote for the constructions that they would
like to see as official LEGO sets. If a design gets more than 10.000 supports,
LEGO will start the process of developing it into an official product, and if
it makes it to the market, the designer will receive a percentage of the
revenues.

Traditional
roles are blurring

One way of
describing the shift in approach is that companies, which have been providing
solutions to you and for you, will
move to solutions created with you and by
you. This goes for customized physical products as well as services like
healthcare, education, banking or travelling.

Although
it’s not as if customers are taking over completely and starting to build
everything themselves, it’s clearly very different than the strict division of
roles and responsibilities between providers and users, that were the norm in
the traditional industrial society. Those old lines are blurring, as consumers become
participants and co-creators.

This in
turn has implications for styles of management. The company loses control of
the process and the outcome, when solutions emerge in the interaction among a
number of different stakeholders on a platform

Managers
cannot hand out top-down commands, because the contributors to a project may be
from different organizations – or they can be customers or volunteers. The
company can influence, but not control, and leadership becomes a matter of
motivating others by the strength of your vision.

The shift
of roles can be challenging, because it requires a rethinking of how you see
yourself contributing value – whether as a company or as a person. In the
co-creation paradigm, being an expert is not about knowing all the facts or
being able to come up with solutions yourself. Rather, expertise can be in
enabling the solution to emerge, by bringing together the right people and resources.
Thus , the teacher is not just an expert in the subject, but rather in making
learning happen. The doctor is not just an expert in disease, but in supporting
health.

Procter and
Gamble famously changed the approach of their huge internal product-development
labs from “research and develop”, to “connect and develop”.

It’s not
just about money

Interestingly,
the collaborative economy is not just about money. For the company that
operates the platform or sells products that work with it, money may be what
drives the business. But for other stakeholders, there can be other motivations
for participating than money. Users and volunteers can contribute to get
recognition and status, to help each other, because they find it interesting –
or because they enjoy the social interaction. It’s an important point that
these values can be as important as money in making the interaction work
productively.From ME to
WE-thinking

The most
challenging part of moving to platforms for co-creation may be the deeper change
in mindset that it requires: From a ME to a WE perspective.

Generally,
the past decades have been an era of ME thinking. There has been an emphasis on
individual freedom and achievement. Winning the competition against everyone else
was seen as the way to grow.

The
Me-thinking appears increasingly problematic and un-suited for a world that is
becoming intensely connected and interdependent.

Instead it
has getting easier and more efficient to develop and seek solutions by working
with others, and in the process accepting that one’s own success depends on the
success of everyone else in the system. WE-thinking is about realizing that our
fate is shared.

WE-thinking
requires trust. To cooperate and share we need transparency, we need better
tools for assessing risk, we need to be able to retaliate if others cheat or
free-ride, we need new ways of sharing ownership and benefits. For the
WE-economy to become the new normal it needs to be operational for regular,
established companies. Businesses may see the potential in opening up, but they
will be very reluctant to do so unless there are tools in place, that make
sharing and collaborating more predictable and reliable.

Obviously, all
of this is not an absolute shift. We will still be competing, we will still be
thinking about our own interests, we will still want to be able to control and
own. But the opportunities in thinking more in terms of WE are growing as
technology connects us, and as the increasing pressure from a growing
population on a finite planet makes it clear that ME-thinking will only exhaust
the available resources for all of us.

Monday, June 16, 2014

The
products and services that we use are developing in two seemingly opposite
directions:

On one hand, we are demanding solutions that are much more
personalized and adapted to fit the exact context that we use them in.

Technology
has given us powerful tools to co-create and configure what we want. The
conventional, top-down, one-size fits all solutions that we have been provided
with so far seem to be losing their ability to solve our current challenges and
to create the next level of value.

Mass customization
and 3D printing, Quantified self in healthcare, and the millions of privately
owned solar panels contributing to the energy supply are examples of the
movement towards decentralization and user-involvement.

On the other hand, companies and organizations are growing to
unprecedented dimensions. The same products and brands are sold worldwide, the
issues we face are global, supply chains are long and crisscrossing the world,
and it is clear that we are increasingly connected, interacting and interdependent.
There are currently 4,5 billion mobile phone users on the planet, and the
number is rising rapidly – as is the bandwidth of our connections.

These two
movements: Towards the global and unified, and towards the hyper local with value
creation at the periphery, are driven forwards and shaped by three strong
trends:

- There are
increasing resource and environmental constraints, which dictate that solutions
be ever more efficient, making more with less, or completely substituting our
current ways of meeting demands.

-
Increasingly, every action and condition will be registered and analyzed. Big
data will create transparency as to demands and preferences, and the
availability of resources. The intense use of data should enable a much more
precise allocation of resources, and a better understanding of costs and
consequences – also in a wider and more long-term perspective.

- As always
in a market economy, there is pressure to reduce cost in order to compete. That
pressure will be particularly high in a world economy driven mainly by a new
developing-world middleclass that’s coming up out of poverty and looking for
affordable solutions, and by a stagnating western economy, with companies
challenged by a new class of low cost competitors from the emerging markets.

All told, a
new model for value creation is taking shape – and it seems to be happening in
almost any sector. Rather than companies and organizations providing ready made
solutions on a mass scale, focus is on creating broad platforms that enable a
number of stakeholders: consumers and other companies, to participate in
co-creating highly contextualized solutions.

Examples of
such platforms are Apple’s App-store, the crowd-funding site Kickstarter, Ebay,
Airbnb and Wikipedia.

These
platforms can be global and they can accommodate both very large players and
small, individual contributors. It’s a model that bridges the seemingly
opposite trends towards the global and
the local.

To the
extent that the economy moves towards platforms, which function as enablers and
brokers, it will create some important new patterns in business.

The
solutions that are created will be highly integrated, using input from several,
hitherto separate industries and combining very different types of players in
the value creation: corporations, small businesses, volunteers, users, public
sector institutions etc.

The
interaction will be highly complex, and like any complex system, results can be
unpredictable and develop in non-linear ways, even more open to fads and sudden
successes and crashes than the current marketplace.

There will
be very strong monopoly tendencies. Once a company has developed a well
functioning platform, the marginal costs of letting in new users are low. At
the same time, there are strong network effects: The more that use a platform,
the more valuable it becomes for all users.

Likewise,
global platforms can tend to be ”winner-take-all” systems. Consumers can pick
the best available from the superstars on the platform – while everyone else
will find it hard to attract users. Furthermore, on a platform that includes contributions
from amateurs and volunteers, professionals and companies will find that they
are competing against solutions that cost next to nothing.Whether you are a rental car company, a
photographer, a designer or a hotel, you will feel a much harder pressure on
prices.

The
platform model will enable a much more efficient use of resources, it will
mobilize competences and capacities that are currently not utilized, and it
will allow users to co-create and configure highly individualized solutions
from a global supply.

It will
also increase competition and challenge the way businesses are currently making
money.